What Is MRR? Guide to monthly recurring revenue & how to calculate it

Key takeaways

• MRR (monthly recurring revenue) is the predictable revenue a subscription business earns each month from active subscriptions – it excludes one-time fees, setup charges and other non-recurring sales.

• The MRR formula is simple: number of paying customers × average revenue per user (ARPU).

• When you report MRR in AUD, changing FX rates can make it appear to grow or shrink even when your subscriber base is unchanged. Track MRR in each billing currency and apply a consistent FX policy when consolidating to AUD.

MRR, or monthly recurring revenue, is the normalised monthly value of predictable recurring revenue from active subscriptions. SaaS, membership and other subscription businesses use it to track growth, forecast recurring revenue and understand customer retention.

Businesses report MRR alongside cash flow and profit, since it gives a consistent read on subscription performance than total revenue alone.

What is monthly recurring revenue (MRR)?

Monthly recurring revenue is the total predictable revenue a business expects to receive each month from its active, paying subscribers. It's calculated by multiplying your number of paying customers by the average revenue per user, and it only includes revenue that recurs on a regular billing cycle.

MRR deliberately excludes anything that isn't recurring – one-time setup fees, onboarding charges, single product purchases and other non-recurring sales all sit outside the calculation, even if a customer pays them alongside their subscription.

What are the benefits of tracking MRR?

Tracking MRR gives a subscription business a real-time view of its financial health, independent of one-off sales spikes or seasonal noise. It's especially useful because it turns unpredictable revenue into a single, comparable monthly figure.

• Measuring growth: MRR lets you compare month-on-month performance and spot whether new sales, upgrades or churn are driving the trend.

• Financial forecasting: A reliable MRR figure makes it far easier to forecast cash flow, plan hiring and set realistic revenue targets.

• Informing product development: Breaking MRR down by plan or customer segment shows which products or tiers are actually driving revenue, so you can prioritise development accordingly.

How to calculate MRR

For fixed-price subscriptions, calculate MRR by multiplying active paying customers by their average monthly recurring revenue per customer. For mixed plans, sum each subscription’s normalised monthly recurring value.

MRR = active paying customers × average monthly recurring revenue per customer (ARPU)

For example, say an Australian SaaS business has 50 customers on a $150/month plan and 30 customers on a $300/month plan:

• 50 × $150 = $7,500

• 30 × $300 = $9,000

• Total MRR = $16,500 AUD

Annual-plan customers need a small adjustment: divide the total contract value by 12 to get their monthly contribution, then add that to the rest of your MRR. A customer paying $3,600 upfront for a 12-month plan contributes $300 to MRR each month.

Most businesses stop calculating this by hand once they have more than a handful of customers. Subscription management software can track MRR, active subscriptions and overdue payments automatically from a single dashboard.

Common mistakes when calculating MRR

MRR is a simple formula, but it's easy to distort by including revenue that shouldn't count, or by counting the right revenue in the wrong way. Common mistakes include:

• Including one-time fees, such as setup or onboarding charges, in the MRR total.

• Recording quarterly or annual contracts at their full value in the month they're paid, instead of spreading them across the contract term.

• Forgetting to apply active discounts, which overstates the revenue a customer is actually contributing.

• Counting one-time payments and free trial sign-ups as if they were recurring revenue.

• Leaving out discounts entirely when a customer is on a promotional or discounted rate.

• Treating variable usage-based charges as fixed MRR. Use a documented method and report consumption-based revenue separately unless it is contractually committed or sufficiently predictable for your chosen methodology.

What are the different types of MRR?

MRR isn't one static number – it's made up of several types that show where your revenue growth (or loss) is actually coming from. Tracking each type separately shows whether you're growing through new sales, expansion, or simply holding onto existing customers. The mix will vary depending on your billing model.

Whether a given dollar counts as new, expansion or usage-based revenue depends on how your business defines and bills recurring value. If you’re weighing up invoicing versus subscription billing, map which MRR types each model will generate before you commit.

MRR vs ARR: what's the difference?

MRR and ARR measure the same underlying recurring subscription value over different timeframes: MRR is a normalised monthly figure, while ARR is usually MRR multiplied by 12 using the same methodology. Total revenue is broader and includes recurring and non-recurring revenue.

What is a good MRR growth rate?

There's no single "good" MRR growth rate that applies to every business – it depends heavily on company stage, funding model and size. Recent private SaaS benchmarking puts median annual revenue growth at 22% across all companies, with bootstrapped businesses growing at a median of 20% and equity-backed businesses at 25%¹.

For Australian businesses billing customers overseas, AUD-reported MRR can change with FX rates even when subscriber activity is unchanged. Holding revenue in the currency collected can reduce unnecessary conversions. Apply a consistent FX methodology when reporting MRR in AUD.

Global Accounts let eligible Australian businesses receive and hold funds in 20+ currencies. FX & Transfers lets you convert held balances when needed; availability and fees depend on the account and transfer.

How can you improve your monthly recurring revenue (MRR)?

Growing MRR sustainably means a mix of getting pricing right, reducing friction for existing customers and cutting down on avoidable churn. Here are some ways to improve your recurring revenue:

• Review your pricing strategy regularly to make sure it reflects the value customers are getting, not just what you set at launch.

• Enable usage-based pricing, or make it easy for customers to move to the next tier as their needs grow.

• Automate recurring payments so customers aren't relying on manual renewal action each billing cycle.

• Offer more payment options to reduce friction at checkout and cut down on failed payments.

• Offer annual plans alongside monthly ones, which improves cash flow and reduces monthly churn exposure.

• Upgrade your accounting or billing software to get real-time data on subscriptions, renewals and failed payments – including automated dunning management to recover revenue before a customer churns involuntarily.

Why businesses choose to maximise their global revenue with Airwallex

Billing processes can affect recurring-revenue reporting through failed payments, manual data and currency conversion. Airwallex’s Billing suite helps automate recurring billing and track subscription metrics as your business scales.

• Automate recurring billing for fixed-price subscriptions, including SaaS plans, memberships and retainers.

• Build flexible plans with multiple products, line items and billing frequencies, such as monthly support alongside an annual licence.

• Support flat-fee, per-unit and graduated-tier subscription pricing, plus multiple billing frequencies. Use the separate Usage-based Billing product for charges based on actual consumption.

• Use free trials, discounts and pro-rated cancellations to manage upgrades, downgrades and other subscription changes.

• Automate invoice creation, payment collection, retries and customer notifications when configured; notification emails require a valid customer email address.

• Accept cards and supported local and global payment methods for recurring payments; availability depends on the currency, customer country and merchant entity.

Frequently asked questions

What does MRR mean?

MRR stands for monthly recurring revenue – the normalised monthly value of predictable recurring subscription revenue from active, paying customers. It excludes one-time fees and other non-recurring charges.

How is MRR calculated?

For a simple fixed-price model, MRR is calculated by multiplying active paying customers by average monthly recurring revenue per customer. Annual plans contribute their recurring contract value divided by 12 for a 12-month term, excluding one-time fees, taxes and variable charges.

What is a good MRR growth rate?

There's no universal benchmark, since a "good" rate depends on company stage, funding and size. Recent private SaaS data puts median annual growth around 20–25%, though early-stage and high-retention businesses can grow considerably faster.

What's the difference between MRR and revenue?

MRR counts predictable recurring subscription value normalised to a monthly figure, while total revenue includes recurring and non-recurring revenue recognised or recorded in the period.

What's the difference between MRR and ARR?

MRR is the normalised monthly recurring figure; ARR is usually that figure multiplied by 12 when both use the same methodology. Neither should be treated as recognised accounting revenue.

Sources

1. https://www.saas-capital.com/research/private-saas-company-growth-rate-benchmarks/